Determining how much house you can afford is a crucial first step in the home-buying process. While lenders will assess your creditworthiness and income, it's wise to have your own estimate of your mortgage affordability. This calculator helps you understand how your income, existing debts, and potential homeownership costs influence the maximum mortgage you can realistically handle.
Key Factors in Mortgage Affordability
Several factors contribute to how much mortgage you can afford. Our calculator takes these into account:
Annual Gross Income: This is your total income before taxes and deductions. Lenders typically use this figure to gauge your ability to repay a loan.
Total Monthly Debt Payments: This includes minimum payments on credit cards, student loans, auto loans, and any other recurring debts. Lenders use your Debt-to-Income (DTI) ratio, which compares your total monthly debt payments (including the potential mortgage payment) to your gross monthly income. A lower DTI generally means you're a lower risk.
Down Payment: The larger your down payment, the less you need to borrow, which reduces your monthly mortgage payment and may help you avoid Private Mortgage Insurance (PMI).
Interest Rate: Even a small difference in the interest rate can significantly impact your monthly payment and the total interest paid over the life of the loan.
Loan Term: Shorter loan terms (e.g., 15 years) have higher monthly payments but less total interest paid compared to longer terms (e.g., 30 years).
Property Taxes: These are annual taxes assessed by local governments on the value of your property. They are typically paid monthly as part of your mortgage payment (escrow).
Homeowners Insurance: This is required by lenders to protect against damage to the property. It's also typically paid monthly via escrow.
Private Mortgage Insurance (PMI): If your down payment is less than 20% of the home's purchase price, lenders usually require PMI to protect them against potential default. This adds to your monthly cost.
How the Calculator Works
This calculator uses a common guideline that your total housing expenses (Principal, Interest, Taxes, Insurance, and PMI – often called PITI) should not exceed 28% of your gross monthly income, and your total debt (including PITI) should not exceed 36% of your gross monthly income. It then works backward to estimate the maximum loan amount you can afford, considering your down payment, and subsequently, the approximate maximum home price you could purchase.
Disclaimer: This calculator provides an estimate only and should not be considered financial advice. Your actual borrowing capacity may vary based on lender policies, credit score, and other individual financial factors. It's always recommended to speak with a mortgage professional for personalized guidance.
Example Scenario:
Let's say Sarah has an annual gross income of $90,000. Her existing monthly debt payments (car loan, student loans) total $400. She has saved a $30,000 down payment for a home. She's looking at homes with an estimated annual interest rate of 6.5%, a 30-year loan term, annual property taxes of $3,000, annual home insurance of $1,200, and an estimated annual PMI of 0.8% of the loan amount. Based on these figures, how much house can she afford?
function calculateAffordability() {
var annualIncome = parseFloat(document.getElementById("annualIncome").value);
var monthlyDebt = parseFloat(document.getElementById("monthlyDebt").value);
var downPayment = parseFloat(document.getElementById("downPayment").value);
var annualInterestRate = parseFloat(document.getElementById("interestRate").value);
var loanTerm = parseFloat(document.getElementById("loanTerm").value);
var annualPropertyTaxes = parseFloat(document.getElementById("propertyTaxes").value);
var annualHomeInsurance = parseFloat(document.getElementById("homeInsurance").value);
var pmiPercentage = parseFloat(document.getElementById("pmi").value);
var resultDiv = document.getElementById("result");
resultDiv.innerHTML = ""; // Clear previous results
if (isNaN(annualIncome) || isNaN(monthlyDebt) || isNaN(downPayment) || isNaN(annualInterestRate) || isNaN(loanTerm) || isNaN(annualPropertyTaxes) || isNaN(annualHomeInsurance) || isNaN(pmiPercentage)) {
resultDiv.innerHTML = "Please enter valid numbers for all fields.";
return;
}
var grossMonthlyIncome = annualIncome / 12;
var maxTotalHousingPayment = grossMonthlyIncome * 0.28; // 28% rule
var maxTotalDebtPayment = grossMonthlyIncome * 0.36; // 36% rule
var maxMonthlyMortgagePayment = maxTotalDebtPayment – monthlyDebt;
if (maxMonthlyMortgagePayment 0 && annualIncome > 0 && pmiPercentage > 0) ? (annualIncome * (pmiPercentage / 100)) / 12 : 0; // PMI is typically based on loan amount, but this is an estimate. Let's refine.
// PMI is usually calculated on the LOAN amount, not income. This makes it tricky without knowing the loan amount.
// A common shortcut is to estimate PMI as a percentage of the loan amount *after* calculating the base P&I.
// For simplicity here, let's assume PMI is a fixed amount per month or based on a simplified calculation if the user provides it.
// If PMI percentage is given, we'll try to approximate it.
// Let's re-evaluate: a more robust way is to iterate or solve the equation for P.
// Let's use a common rule of thumb for PMI: If down payment < 20%, PMI is needed. Let's estimate it.
// We need to find P such that P + I + T + Ins + PMI <= maxMonthlyMortgagePayment
// P = Loan Amount
// I = P * monthlyInterestRate
// T = monthlyPropertyTaxes
// Ins = monthlyHomeInsurance
// PMI = P * (pmiPercentage/100) / 12 (This is a simplified assumption for calculation)
// Rearranging: P * (1 + monthlyInterestRate + pmiPercentage/1200) + T + Ins <= maxMonthlyMortgagePayment
// P * (1 + monthlyInterestRate + pmiPercentage/1200) <= maxMonthlyMortgagePayment – T – Ins
// P <= (maxMonthlyMortgagePayment – T – Ins) / (1 + monthlyInterestRate + pmiPercentage/1200)
// This formula isn't quite right as P&I calculation is not linear.
// Let's use a more standard P&I calculation and iterate or use a financial function if available,
// or estimate the P&I portion first.
// Let's estimate the maximum P&I payment possible:
var maxPIPayment = maxMonthlyMortgagePayment – monthlyPropertyTaxes – monthlyHomeInsurance;
// If after taxes and insurance, we have nothing left for P&I, then affordability is zero.
if (maxPIPayment <= 0) {
resultDiv.innerHTML = "Your estimated property taxes and insurance alone exceed your affordable housing payment. Consider a less expensive property or increasing your income/down payment.";
return;
}
// Now, let's estimate the loan amount (P) that results in a P&I payment of maxPIPayment.
// We need to account for PMI. PMI is usually a percentage of the loan.
// Let's assume the max loan amount is P_total.
// P_total = P_principal + PMI_amount
// The P&I is calculated on P_principal.
// P&I = f(P_principal, i, n)
// PMI = P_total * (pmiPercentage / 100) / 12
// So, maxPIPayment = f(P_total – PMI_amount, i, n)
// maxPIPayment = f(P_total – P_total * (pmiPercentage/100)/12, i, n)
// maxPIPayment = f(P_total * (1 – pmiPercentage/1200), i, n)
// This is a non-linear equation. A common approach is to iterate or use a financial calculator library.
// For a simple JavaScript solution, we can approximate or use a formula that assumes PMI is part of the loan principal.
// Let's try a direct calculation assuming PMI is part of the loan amount and we need to solve for it.
// PITI <= maxTotalDebtPayment
// P + I + T + Ins + PMI <= maxTotalDebtPayment
// var P be the loan amount.
// Monthly PMI = P * (pmiPercentage / 100) / 12
// Monthly P&I = P * [ i(1 + i)^n ] / [ (1 + i)^n – 1]
// Trying to solve P from: P*MPR + T + Ins + P*PMI_monthly <= maxTotalDebtPayment – monthlyDebt
// where MPR = monthly rate of payment (P&I)
// P * (MPR + PMI_monthly) <= maxTotalDebtPayment – monthlyDebt – T – Ins
// A practical way is to estimate a loan amount, calculate its PITI, and adjust.
// Let's assume the loan amount we are calculating the affordability for is `loan_amount_guess`.
// Monthly P&I for `loan_amount_guess` can be calculated.
// Then calculate PMI for `loan_amount_guess`.
// Then check if P&I + PMI + Taxes + Insurance 0 && annualIncome > 0 && pmiPercentage > 0 ? (annualIncome * (pmiPercentage / 100)) / 12 : 0)) * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
// The above formula is incorrect. We are trying to find P.
// P & I portion = maxPIPayment (assuming we subtracted PMI for now)
// P = maxPIPayment * [ (1 + i)^n – 1 ] / [ i(1 + i)^n ]
// Let's recalculate P based on the P&I portion that includes PMI as a component.
// var max_principal_and_interest_payment = maxMonthlyMortgagePayment – monthlyPropertyTaxes – monthlyHomeInsurance;
// var the loan amount be P_loan.
// If down payment < 20%, PMI is required. Let's assume PMI is calculated on P_loan.
// Monthly PMI = P_loan * (pmiPercentage / 100) / 12
// Total monthly payment = P&I(P_loan) + PMI(P_loan) + Taxes + Insurance
// We want this to be <= maxTotalDebtPayment – monthlyDebt
// Let's try to find P_loan.
// P&I(P_loan) = P_loan * [ monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments) ] / [ Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1 ]
// Total P&I + PMI = maxTotalDebtPayment – monthlyDebt – monthlyPropertyTaxes – monthlyHomeInsurance;
// This requires solving a complex equation.
// A common financial calculator approach is to find P given M (monthly payment), i (rate), n (periods).
// P = M * [ 1 – (1 + i)^(-n) ] / i
// Let's use this formula, but first, we need to determine the 'M' (maximum monthly P&I + PMI payment) available.
var availableForPIandPMI = maxMonthlyMortgagePayment – monthlyPropertyTaxes – monthlyHomeInsurance;
if (availableForPIandPMI <= 0) {
resultDiv.innerHTML = "Your estimated property taxes and insurance alone exceed your affordable housing payment.";
return;
}
// Now, we need to find the loan principal (P) such that P&I(P) + PMI(P) = availableForPIandPMI
// PMI(P) = P * (pmiPercentage / 100) / 12
// var R_monthly = monthlyInterestRate
// var n = numberOfPayments
// var PMIR = pmiPercentage / 100 / 12
// P * [ R_monthly * (1+R_monthly)^n / ((1+R_monthly)^n – 1) ] + P * PMIR = availableForPIandPMI
// P * [ (R_monthly * (1+R_monthly)^n / ((1+R_monthly)^n – 1)) + PMIR ] = availableForPIandPMI
// P = availableForPIandPMI / [ (R_monthly * (1+R_monthly)^n / ((1+R_monthly)^n – 1)) + PMIR ]
var pmiMonthlyRate = (pmiPercentage / 100) / 12;
var factor = Math.pow(1 + monthlyInterestRate, numberOfPayments);
var monthlyPIFactor = (monthlyInterestRate * factor) / (factor – 1);
// Avoid division by zero if factor is 1 (e.g., rate is 0, though handled above) or if PMI rate is so high it dominates.
var denominator = monthlyPIFactor + pmiMonthlyRate;
if (denominator <= 0) { // This could happen if rate is extremely low and PMI is high, or if inputs are strange.
resultDiv.innerHTML = "Calculation error due to input values. Please check your rates and percentages.";
return;
}
maxLoanAmount = availableForPIandPMI / denominator;
}
if (maxLoanAmount 0 && pmiPercentage > 0) ? maxLoanAmount * (pmiPercentage / 100) / 12 : 0;
var calculatedPIPayment = 0;
if (monthlyInterestRate > 0) {
calculatedPIPayment = maxLoanAmount * (monthlyInterestRate * Math.pow(1 + monthlyInterestRate, numberOfPayments)) / (Math.pow(1 + monthlyInterestRate, numberOfPayments) – 1);
} else {
calculatedPIPayment = maxLoanAmount / numberOfPayments; // Simple division if rate is 0
}
var totalMonthlyHousingCost = calculatedPIPayment + calculatedPMIAmount + monthlyPropertyTaxes + monthlyHomeInsurance;
var totalMonthlyDebtIncludingMortgage = totalMonthlyHousingCost + monthlyDebt;
// Ensure the calculation respects the 28% and 36% rules strictly.
// The `maxMonthlyMortgagePayment` already limits the PITI + PMI.
// We need to ensure `totalMonthlyDebtIncludingMortgage` maxMonthlyMortgagePayment) {
// This scenario should ideally not be reached if the maxLoanAmount calculation is correct,
// but as a safeguard:
affordabilityMessage = "Warning: Your calculated monthly housing cost slightly exceeds the recommended maximum. Your actual affordability may be lower.";
// Adjust maxHomePrice down if this happens.
// This indicates an issue in the calculation method or rounding.
// For now, we'll just warn.
}
if (totalMonthlyDebtIncludingMortgage > maxTotalDebtPayment) {
// This is a critical failure of the calculation based on the initial assumptions.
// This implies that even with the calculated loan, the overall debt ratio is too high.
// The calculation of maxLoanAmount should have prevented this.
// If it happens, it points to a formula flaw or edge case.
affordabilityMessage = "Calculation Issue: The calculated loan amount results in a total debt-to-income ratio exceeding the recommended limit. Please review inputs or consult a professional.";
maxHomePrice = 0; // Force affordability to zero if DTI limit is breached.
}
// Format results
var formattedMaxLoanAmount = maxLoanAmount.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxHomePrice = maxHomePrice.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedTotalMonthlyHousing = totalMonthlyHousingCost.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
var formattedMaxTotalDebt = maxTotalDebtPayment.toLocaleString(undefined, { style: 'currency', currency: 'USD' });
resultDiv.innerHTML = affordabilityMessage +
"Based on your inputs:" +
"Estimated Maximum Loan Amount: " + formattedMaxLoanAmount + "" +
"Estimated Maximum Home Price (including down payment): " + formattedMaxHomePrice + "" +
"(This assumes your total monthly housing costs, including Principal, Interest, Taxes, Insurance, and PMI, do not exceed 28% of your gross monthly income, and your total debt payments, including housing, do not exceed 36%.)" +
"Your Estimated Total Monthly Housing Payment (PITI + PMI): " + formattedTotalMonthlyHousing + "" +
"Your Estimated Total Monthly Debt Payments (incl. this mortgage): " + totalMonthlyDebtIncludingMortgage.toLocaleString(undefined, { style: 'currency', currency: 'USD' }) + "" +
"Recommended Maximum Total Monthly Debt: " + formattedMaxTotalDebt + "";
}
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